Mistakes You Making Right Now That Will Crush Your Dream Of Retiring Early

Are you planning to retire early? Or maybe you're dreaming about it, but it feels like too big a target to pursue. After all, how many people do you meet who have made it all the way to the top?

I'm here to reassure you that it's entirely probable. After working in every aspect of finance for years, I've realized that personal financial achievement is *not* about picking the right stocks or getting a high profit.

It all comes down to meticulous preparation. And stopping the big errors that can derail everything. As a financial planner, these are the most popular ones.

Not Having an Emergency Fund

Sh*t will eventually hit the fan. A haphazard hospital cost. I'm taking Fluffy to the veterinarian. Replacing any ridiculously costly component of your house, such as the furnace.

You never know what will trigger the next emergency. However, if one occurs and you do not have a cash reserve, a minor surprise will lead to credit card debt, deductions from savings accounts, and even set you back from reaching your early retirement target.

Avoid tension and keep on board by depositing $1,000 in a savings account labeled "emergencies" in your banking app. Increase your emergency fund to 3–6 times your monthly salary for added stability.

Waiting to Invest

Why wait? There is no such thing as possessing insufficient funds to invest. Micro trading applications such as Acorns and Stash assist you in investing your spare change. Robinhood enables you to purchase fractional shares in companies such as Apple and Tesla. With the Fundraise app, you will buy a diverse portfolio of real estate for as little as a few hundred dollars.

As a young investor, the advantage is time. The small sum you spend now will rise, compound, and ideally double until you need it. That is how you can save the millions needed to retire early.

If you wait to invest, on the other hand, you'll need to save more out of your own pocket for retirement. All because your money had less time to sit in your investment account and grow.

Not Having a Plan with Clear Goals

Your financial decisions should be in line with your objectives. In the world of finance, this is known as goal-based planning. A client's strategy optimizes for the things that matter to them: their goals and values.

If you want to retire early, you should think about…

how much you need to retire early

your timeline (worst, median, and best-case scenarios)

how much to save from each paycheck

what accounts to use for growing your money

how to adjust your strategy along the way

That's in addition to planning for the 3–5 other goals you might have.

And the strategy does not have to be a jumble of records replete with diagrams and legal jargon. Visit Reddit or Quora for case studies on people who have detailed the tactics that allowed them to retire early. If you're always feeling stressed, try hiring a specialist, such as a financial manager or money coach.

Focusing On Expenses More than Income

Spending less money is easier than earning more of it. It takes less time, and there is no need to bargain with your manager or pitch the possibility of cutting your cable bill. This is why the concept of minimalism is so well suited to early retirement.

However, there is a limit on how much you can subtract from your monthly spending. Whereas your earning capacity has a much higher limit. And, when paired with the influence of compounding, the opportunity to raise an additional million dollars over your lifespan pushes the needle even faster than spending $47 a month on television.

So, in addition to trimming the fat off your budget, work on developing a long-term side hustle. Preferably one that allows you to earn a scalable salary. For me, that means writing on Medium, putting my knowledge into my Substack newsletter, and then playing with e-books and courses.

Avoiding Risk At All Costs

Nobody wishes to go bankrupt. That is the vulnerability we are referring to when discussing investments. Any investment carries the risk of financial gain (reward) or financial loss (risk).

We now know that, in general, humans (aka ordinary investors) dislike losing twice as much as they like winning, thanks to the work of behavioral psychologists Daniel Kahneman and Amos Tversky. This is loss aversion, a decision-making tendency that causes you to stop and prioritize losses over profits.

In practice, this can lead to complete avoidance of investment. Something I see in millennials who have personally and indirectly (via their parents) seen record-breaking stock market declines and economic recessions.

However, risk, or the potential of losing money, will still be a result of using the stock market to create capital and achieve financial freedom.

The trick to avoiding financial catastrophe is NOT to absolutely escape risk. Instead, the key is to limit the downside by diversifying your profits and savings and make the necessary changes to your financial strategy as you progress through life's phases.

Failing to Adjust Around Major Life Events

Life is constant change, and your financial plan is a reflection of that. Your 20s and 30s are when major life events start to happen faster and more frequently.

The big ones are…

buying a home

getting married

having kids

switching jobs or careers

starting a business

Each landmark serves as a reminder that it's time to revise your financial strategy. For example, after raising children, it is a smart idea to reassess your emergency fund, raise your life insurance, create a simple estate plan, and begin planning for education.

Failure to change the schedule puts you out of control on the way to early retirement. Instead of proactively steering and adapting to give yourself the best chance, you become a rider who responds to whatever life throws at you, hoping it works out according to your expectations.

Failing to Protect Yourself from Blowups

Financial blow-ups occur when an external occurrence (over which you have NO control) takes out your net worth. Forcing you to restart your goals, which is a difficult spot to rebound from both financially and mentally.

Best of all, 101 different items will devastate the finances.

stock market crash

medical emergency

losing your job

becoming an entrepreneur

getting divorced

This is why it is important to *not* be one-sided with the finances. You don't just want to optimize for development. It is equally necessary to protect the downside.

A stable cash reserve, revenue and savings diversification, the required amount and forms of insurance, and a simple estate portfolio all have a cushion of protection when a catastrophe occurs.

Thinking Short (instead of long) Term

Long-term thinking is an acquired talent. One that helps you to look into the future, set specific targets based on your future wants and needs, and then devise a course of action to accomplish them.

The dilemma is that our minds are hardwired to achieve immediate gratification. It's difficult to imagine what you'll want two decades from now. This is why any investor faces the conundrum…

"Should I invest now to be happy, or save now to be happy later?"

Forget about predicting what it will be like in ten or twenty years. Only know that you'll like the right to say "yes" to starting a business, taking time off work, investing in a friend's business, traveling the world…or whatever the potential, uncertain chance looks like.

The motivation to help you learn about and make long-term financial choices is flexibility (rather than a perfectly thought-out plan).

Sacrificing Your Happiness Now

Giving up all of life's pleasures - fancy meals, travel, happy hours with friends, your morning coffee - is a choice many FIRE enthusiasts believe you must make if you want to retire at 45.

It's a prescription for disaster, in my opinion. To keep inspired for a decades-long target like early retirement, you need the joys of life, both big and small.

Instead of going all-in on minimalism, try borrowing Ramit Sethi's spending theory for a more rational solution.

"Frugality, quite simply, is about choosing the things you love to spend extravagantly on, and then cutting costs mercilessly on the things you don't love." - Ramit Sethi

Not Getting Help Along the Way

Asking for assistance is the quickest way to get from point A to point B. However, it is not a talent that comes easily. Most people see that as a symbol of failure. It's a hint that you're incompetent. A symbol of surrender.

Yet nothing may be further from the facts. Asking for assistance with your early retirement target increases your chances of meeting it on schedule. And if you make an error that goes unnoticed, it could mean stopping or abandoning your target entirely.

Smart investors understand what they don't know and then fill in the holes with expert counsel, technologies, and resources. As in, assistance.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.